Russell 2000 falls on subprime losses

Alex Alexandrov | Nov 09, 2007 5:06pm EST | Comment

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The Russell 2000 (NYSE: IWM) moved lower today on news from Wachovia Corp. (NYSE: WB) of more than $1 billion in losses due to the credit crunch. The small-cap index dropped for the third time this week, retreating 8.52 points, or 1.09%, to 772.38. The Dow Jones Industrial Average (INDU) shed 223.55 points, or 1.69%, to 13,042.74.

On a year-to-date basis, the Russell 2000 has lost 1.92%, while the Dow has advanced 4.56% and the S&P 500 has added 2.62%.

The bears dominated the session today following news that Wachovia expects to suffer additional losses of $1.1 billion in the third quarter due to collateralized debt obligations.

The Charlotte, N.C.-based bank, the fourth largest in the United States, also said that it will write down collateralized debt obligations of about $1.11 per share for the month of October and expects to see loan losses of over $500 million in parts of the country that have been most severely affected by the slump in the housing sector.

The news comes as the latest reminder that the subprime mess continues to plaque the financial system.

The small-cap futures were pointing south and the Russell 2000 joined the other major U.S. indices in opening with a drop.

There was some upbeat economic news today, coming in the form of a surprise narrowing of the U.S. trade deficit. The Commerce Department reported that the deficit declined 0.6% to $56.5 billion in September, the lowest level since May 2005, as exports increased due to a weak dollar and strong growth overseas. In August the deficit stood at $56.8 billion.

But investors were not impressed, possibly because the same government report showed that import prices rose 1.8% in October, above the projected 1.3%. That’s a troubling sign that imports are contributing to inflation in the United States. Import prices added 0.8% in September.

Separately, an index of consumer confidence fell to its lowest level in two years in November, as Americans became less confident about the economy and less willing to spend money.

Here are the day’s biggest percentage gainers and losers, along with top volume leaders, among companies with a market cap between $100 million and $750 million:

Biggest percentage gainers:

• Triad Guaranty Inc. (TGIC), up 28% to $8.58. A company representative could not be reached for comment.
• Omega Financial Corp. (OMEF), up 17% to $30.56 on news it is being acquired by F.N.B. Corp. (FNB) for $393 million.
• FTD Group Inc. (FTD), up 15% to $14.50 on news of higher fiscal first-quarter profit.

Biggest percentage losers:

• Virco Manufacturing Corp. (VIRC), down 18% to $9.90. A company representative could not be reached for comment.
• Home Diagnostics Inc. (HDIX), down 17% to $7.13 on news of an analyst downgrade.
• HFF Inc. (HF), down 16% to $6.70 on news of a decline in third-quarter net income.

Volume leaders:

• Security Capital Assurance Ltd. (SCA) 5,266,200 shares traded.
• Powerwave Technologies Inc. (PWAV) 4,964,200 shares traded on news of an analyst upgrade.
• Visteon Corp. (VC) 4,421,800 shares traded on news of job cuts at a company factory.

The day saw 93 small-cap stocks set 52-week lows, while 10 small caps established 52-week highs.